It's Our Money

When you think of Pennsylvanians in need of government assistance, who do you think of? We bet it’s not millionaire developer Bart Blatstein. And yet, Blatstein is a candidate for up to $100 million in state government grants for a slew of construction projects in Philadelphia, through something called the Redevelopment Assistance Capital Program (RACP).

How on earth did Pennsylvania end up with a program that gives millions of dollars to millionaires? We’ll try to explain.

Q: When did Pennsylvania start giving money to private developers?

A: RACP was started in 1986 and has helped fund a wide variety of projects, from a new arena for the Pittsburgh Penguins to renovations to Panther Valley High School’s football stadium in Carbon County. This year, money could go to help build the Sen. Arlen Specter library at Philadelphia University, a hotel in downtown Swarthmore and a spa and golf course in Chester County.

Q: Why does Pennsylvania give money to private developers?

A: RACP issues grants to projects that are supposed to spur economic development, or provide some type of historic or cultural benefit. Backers argue that it helps attract businesses, boosting the local economy and providing jobs.

Q: How do I get the state to give me millions of dollars?

A: To be considered, a project needs to be named in legislation authorizing the governor to spend RACP money on it. Then, the governor needs to actually agree to fund the project.

Q: And can any old project get this money?

A: There are some eligibility requirements. Projects need to be a certain size to qualify — at least $5 million if it's happening in Philadelphia — and must have a certain amount of matching funds lined up. Some infrastructure and housing projects funded through other state programs aren’t eligible.

Q: How much money goes into these projects?

A: As part of this year’s budget process, the Legislature gave the governor the power to spend up to $600 million. When the governor gives that money out, the state will have spent, in total, more than $4 billion on RACP.

Q: But wait. The state’s hard up for cash. How is it coming up with money for this?

A: It’s borrowing the money. Remember, the state has two different budgets. The operating budget, which pays for things like employee salaries, is funded with taxes and needs to be balanced each year. It’s in trouble because of the recession. The capital budget, on the other hand, pays for infrastructure – things like roads or state office buildings, which last a long time. The state gets capital money by issuing bonds and then slowly paying them back, with interest, over many years. RACP money comes from the capital budget.

Q: So the state can spend as much as it wants on RACP projects?

A: Not really. Paying back debt gets expensive – the state currently spends about 3.5% of its operating budget each year on capital budget debt service. The more projects the state spends money on, the more tax dollars have to go to paying that debt down, meaning there’s less money for other programs.

Q: Is that why people object to this program?

A: It’s one reason. Some people, like the conservative Commonwealth Foundation, are philosophically opposed to the state spending money on private projects. Then there are good-government activists who think the allocation process could be cleaned up.

Q: What’s wrong with the process?

A: Well, for one, it's impossible to tell which state lawmaker is behind which RACP project. The projects eligible for RACP are introduced en masse by legislative leaders, so there's no name attached to individual proposals.

Critics also point out that RACP projects aren’t chosen through an open competitive bidding process – they’re just picked by politicians.

Q: That’s ridiculous. Does anyone else do things like this?

A: Other states do use capital money for private economic development projects like stadiums.

Q: Is anyone trying to change things here?

A: The state's good-government groups are just getting mobilized around the issue, and some have yet to take a clear position. Tim Potts, one of the co-founders of Democracy Rising Pennsylvania, says his group is going to talk about filing a suit to shut RACP down at its October board meeting.